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Started By
Message
S-Corp Question
Posted on 3/20/13 at 12:00 am
Posted on 3/20/13 at 12:00 am
My family owns a business that has existed for a long time and was initially filed as an S-Corp. This business is about to lease out some office space for 3-4k a month. I know S-Corps are tax advantageous but is the S-Corp the best way to keep as much money as we possibly can?
In other words, if I want to spend the money on other things outside the business what's the best way to go about?
TIA
In other words, if I want to spend the money on other things outside the business what's the best way to go about?
TIA
This post was edited on 3/20/13 at 12:01 am
2
Posted on 3/20/13 at 12:08 am to Interception
Distribute earnings through dividends assuming you are a shareholder.
Posted on 3/20/13 at 12:20 am to schexyoung
Okay, why do you say that?
I thought capital gains just went up?
I thought capital gains just went up?
Posted on 3/20/13 at 12:30 am to Interception
quote:
I thought capital gains just went up?
Even though capital gains went up about 5-7% it's still likely less of a tax burden than income tax. Depends on your tax bracket.
Posted on 3/20/13 at 1:34 am to schexyoung
quote:S corporation distributions are not taxed as dividends to the shareholder unles the company operated as a C corporation and had undistributed earnings and profits. The OP wrote that the business has been an S corporation since inception, so it has no accumulated E&P to distribute. All of ht eS corporation income is taxable to the shareholders whether or not any dsitributions are made to the shareholders.
Distribute earnings through dividends assuming you are a shareholder
More information is necessary to determine how to minimize the tax consequences of $3,000-$4,000 of rental revenue per month to the shareholders.
Posted on 3/20/13 at 5:00 am to Poodlebrain
quote:
More information is necessary to determine how to minimize the tax consequences of $3,000-$4,000 of rental revenue per month to the shareholders
What info do you need? I'm all ears Poodlebrain
Posted on 3/20/13 at 7:28 am to Interception
quote:Income and losses from rental real estate activities has all sorts of special rules. How those rules apply depends on several factors that go beyond the scope of a message board discussion. You need to sit down with a tax professional and review your prior years tax returns and current year information (both the S corporation and your individual) to determine the best approach to minimizing the tax consequences of revenue from rental real estate activities.
What info do you need? I'm all ears Poodlebrain
Posted on 3/20/13 at 4:28 pm to Poodlebrain
Assuming they have no E&P, there should not be any passive income consequences.
The character of the income to the S-Corp is "passed through" to the shareholders. Since this rental income is ordinary income, it will be ordinary income to the shareholders.
You may want to make damn sure there are minimum distribution requirements (i.e. shareholder agreement), otherwise, you could be allocated income with no cash to pay it.
If you don't understand the basics of subchapter S or subchapter K, it might be best to get in touch with an accountant to tax attorney.
You don't want to blow your S election unnecessarily (generally never at all).
The character of the income to the S-Corp is "passed through" to the shareholders. Since this rental income is ordinary income, it will be ordinary income to the shareholders.
You may want to make damn sure there are minimum distribution requirements (i.e. shareholder agreement), otherwise, you could be allocated income with no cash to pay it.
If you don't understand the basics of subchapter S or subchapter K, it might be best to get in touch with an accountant to tax attorney.
You don't want to blow your S election unnecessarily (generally never at all).
Posted on 3/20/13 at 4:54 pm to ShreveportTIGER318
quote:Rental real estate is by definition a passive activity unless there is material participation. There are separate line items on the Schedule K-1 for rental real estate and other rental activities. The reason is because rental real estate requires separate reporting via Form 8582, used to determine passive activity losses allowed.
The character of the income to the S-Corp is "passed through" to the shareholders. Since this rental income is ordinary income, it will be ordinary income to the shareholders.
As I said, businesses that have rental real estate activites incidental to another trade or business have complex reporting issues, and consulting with a tax professional is recommended.
Posted on 3/21/13 at 7:27 am to Interception
Write yourself a check from the business and call it a dividend. No soc sec or Medicare taxes paid.
Posted on 3/21/13 at 9:39 am to MadDoggyStyle
S-Corps dont issue dividends!
Shareholders can take distributions which aren't subject to SE taxes but they must take a salary equal to what they would pay someone else to do the services they are performing.
Shareholders can take distributions which aren't subject to SE taxes but they must take a salary equal to what they would pay someone else to do the services they are performing.
Posted on 3/21/13 at 9:51 am to MadDoggyStyle
quote:And know that the IRS will contact you wanting to know what the hell you think you were doing.
Write yourself a check from the business and call it a dividend. No soc sec or Medicare taxes paid.
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